Skip to main content
Learn

What Is a ‘Circuit Breaker’ and How Can It Mitigate Flash Crash Risks?

A temporary trading halt during extreme volatility to cool the market and prevent cascading liquidations.
Greeks.Live22.11.25

What Is a ‘Circuit Breaker’ and How Can It Mitigate Flash Crash Risks?

A circuit breaker is a temporary trading halt or restriction imposed by an exchange when market volatility exceeds a predefined threshold. Its purpose is to pause trading, allow the market to cool down, and prevent panic selling or cascading liquidations from spiraling out of control.

By halting or slowing down trading, it gives the exchange time to manage risk and allows traders to post additional margin, thereby mitigating flash crash risks.

How Does the Concept of a ‘Circuit Breaker’ Relate to Derivatives Trading?
Could Automated DeFi Protocols Implement a Form of “Smart Contract Circuit Breaker” to Prevent Flash Crashes?
What Regulatory Mechanisms Are in Place to Prevent or Mitigate Flash Crashes in Traditional and Crypto Markets?
What Is the Purpose of a “Circuit Breaker” in Traditional Markets?

About

Contact

Editorial Policy

Terms of Service

Privacy Policy

Cookie Policy

© 2025 Greeks.Live

All Rights Reserved

Greeks.Live RFQ

Build by Noo on Engine

Source: The content on this website is produced by Greeks.live's proprietary analysis systems, which utilize advanced Large Language Models (LLMs). This information might not be subject to a full human review before publication and may contain errors.
Responsibility: You should not make any financial decisions based solely on the content presented here. We strongly urge you to conduct your own rigorous due diligence and to consult a qualified, independent financial advisor.
Purpose: All information is intended for informational purposes only. It should not be construed as financial, investment, trading, or any other form of professional advice. News and data are not trading signals.
Risk: The cryptocurrency, derivatives, and options markets are highly volatile and carry significant risk. By using this site, you acknowledge these risks and agree that Greeks.live and its affiliates are not responsible for any financial losses you may incur.